Commerce Commission v Fletcher Challenge Ltd - [2000] NZCA 146

IN THE COURT OF APPEAL OF NEW ZEALAND

CA33/00

UNDER

THE COMMERCE ACT 1986

BETWEEN	THE COMMERCE COMMISSION
Appellant

AND	FLETCHER CHALLENGE LIMITED
First Respondent

AND	FLETCHER CHALLENGE ENERGY LIMITED
Second Respondent

AND	ELECTRICITY CORPORATION OF NEW ZEALAND LIMITED
Third Respondent

AND	GENESIS POWER LIMITED
Fourth Respondent

Hearing:	24 July 2000
Coram:	Gault J Keith J Tipping J
Appearances:	J R F Fardell and K F Smith for Appellant W M Wilson QC and L J Taylor for First and Second Respondents J A Farmer QC and M R Dean for Third Respondent J A Farmer QC and A M Peterson for Fourth Respondent
Judgment:	31 July 2000

JUDGMENT OF THE COURT DELIVERED BY GAULT J

This is an appeal with leave from a judgment of Robertson J sitting in the Commercial List in which, after hearing applications to strike out parts of a statement of claim, he ordered the filing of a further amended statement of claim. As a condition of granting leave to appeal the Judge required the joinder of Genesis Power Ltd as fourth defendant and required that a strike out application made by that company, which he transferred to this Court, be dealt with at the same time.
The proceeding was commenced in December 1997 and the impression is inescapable that the parties are digging in for a major campaign with ultimate determination in any efficient manner presently obscured by costly skirmishes and strategies.
The Commerce Commission has formed the view that competition in certain gas markets is imperilled as a result of two acquisitions of interests in the Kupe gas field and contracts relating to the exercise of certain rights attaching to those interests. In the proceeding the Commission seeks to impugn this alleged anti-competitive conduct at every level and to visit upon all possible parties the maximum conceivable remedies. To that end, the fourth amended statement of claim, which is that to which the argument in this Court was addressed, comprises more than 270 paragraphs running to 41 pages. There are now four causes of action, two having earlier been struck out and no longer being pursued.
From the statement of claim it is possible to discern that companies in the Fletcher Challenge Ltd (FCL) group, which includes Fletcher Challenge Energy Ltd (FCE), in early 1997 acquired from other joint venture parties two shares in the Kupe gas field mining permit. A Fletcher subsidiary already held a 2.5% share. On 10 February 1997 the 20% interest of Norcen Energy Resources Ltd was acquired on exercise of a pre-emptive acquisition right. On 28 February 1997 Fletchers agreed with Electricity Corporation of New Zealand Ltd (ECNZ), a State enterprise, by the FCE/ECNZ agreement, to bid for and share the 40% interest of another of the joint venturers, Western Mining Corporation (NZ) Ltd. That was acquired on 14 March 1997 and the arrangement was effected by a Novation Agreement dated 27 March. By these acquisitions the Fletcher group share increased to 36.75%. ECNZ acquired a 25.75% share…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] NZCA 146
Decision Date: 31 July 2000

CaseChat Overview and Summary

The Commerce Commission, as appellant, appealed a judgment of Robertson J in which he ordered the filing of a further amended statement of claim and struck out parts of the Commission's statement of claim. Fletcher Challenge Ltd and Fletcher Challenge Energy Ltd, as respondents, opposed the appeal and the newly joined Genesis Power Ltd sought to be struck out of the proceedings. The appeal raised issues about the availability of divestment orders, the survival of divestment orders after assignment of assets, and the ability to rely on acquisitions that do not result in dominance or strengthening of dominance.

The Court held that parties to a contravention of section 47 of the Commerce Act cannot be the subject of a divestment order under section 85, and the divestment remedy does not survive assignment of the acquired assets to a third party. Additionally, the Court found that an acquisition or transaction that does not result in dominance or strengthening of dominance cannot contravene section 47 so as to trigger the divestment jurisdiction.

The Court allowed the appeal in part by granting leave to amend the claim to allege that the Norcen and Western Mining acquisitions are part of a single acquisition scheme or process. The Court also struck out allegations against Genesis under section 47, finding that section 47(1)(a) is directed to acquisitions creating dominance and not those merely sustaining it. The Court held that it was not prepared to strike out the section 27 allegations against Genesis at the strike out stage and that these allegations should be dealt with once all the facts are established.

The final orders of the Court were that the Commission's appeal was allowed only to the extent of granting leave to amend the claim as indicated in the judgment, the application by Genesis was allowed in part and the allegations against that company under section 47 were struck out, and the costs in this Court were to be paid by the Commission to the first and second respondents together and to the third respondent, with Genesis meeting its own costs.

Orders